Logistically sound: Japan’s digital supply chain future

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Japan is traditionally one of the world’s supply chain superpowers, a gateway between Southeast Asia’s cheap labor and manufacturing bases and the consumers of the west. However, its supply chain has always had to remain resilient in the face of reacting to crises but in the face of pressure has had an image of falling behind its global competitors. But with a major trade deal recently agreed between Japan and the EU, what changes can we expect from Japan’s supply chain industry?

What is happening in Japan?

Moves are underway to overhaul the logistics sector in Japan, and third-party logistics (3PL) has been on the rise. Companies have been reviewing the ways their logistics networks operate and are increasingly outsourcing to 3PL providers, seeking to cut costs and improve efficiency.

Inward investment is coming, with the likes of Singapore-based global warehouse operator GLP – Asia’s largest logistics facility provider – setting up an investment fund totaling around 625 billion yen (US$5.6 billion) to develop logistics facilities in Japan, with a dozen properties planned for 2019 and beyond. This expansion includes plans for the big urban areas of Tokyo and Osaka, but also Japan's largest logistics facility in Sagamihara, Kanagawa Prefecture, scheduled for completion in 2022.

The key driver behind the new impetus in Japan’s logistics space is e-commerce: it has been a slow grower in Japan but has recently shown a spike in demand and growth. According to Statista, Japan’s e-commerce revenues will amount to around $8.6 billion in 2019, and are set to continue growing at a CAGR of around 5 percent between 2019 and 2023, to a value of $10.4 billion by 2023.

This is helping drive demand in the logistics space: cutting-edge logistics facilities and operators that can handle speedy, efficient shipments of consumer goods have a big opportunity. And that means digital technology.

What technologies can Japan leverage?

At first look, it seems that blockchain and the Internet of Things (IoT) are the two technologies having the biggest impact on Japan’s logistics industry.

NTT has developed a blockchain platform for supply chain and logistics management that combines blockchain with IoT innovations like RFID and is aimed particularly at Japan’s manufacturing sector. Blockchain also offers the possibility for improving the efficiency of inventory financing, based on blockchain-enabled track and trace technology that can help manufacturers with complex supply chains and ensure products are traceable at every step of the chain.

Using IoT solutions like RFID or IoT-connected sensors can mean factory workers need not spend so much time scanning every pallet of goods to ensure it is there, since RFID allows goods to be scanned collectively using smartphones, while IoT sensors enable continuous location tracking.

Further to IoT and blockchain solutions, however, Japan can embrace other digital tools to enhance supply chain operations. Augmented reality (AR) is one area where smart glasses, such as HoloLens, can be used to enhance warehouse workers’ ability to pick, track and dispatch goods. Logistics giant DHL has been rolling out smart glasses in its Japan facilities to help item pickers to optimize their work in the warehouse. DHL has reported 10 to 12 percent improvements in productivity in operations using AR-enabled smart glasses.

Unmanned aerial vehicles (UAVs), also known as drones, are also gaining traction in Japan’s supply chain. Drones have previously been used in Japan for land surveys, farming and security but this year will see Chinese retail giant JD.com work with Japanese e-commerce platform Rakuten to use drones and autonomous delivery robots in the supply chain to deliver goods to remote and mountainous areas.

Japan’s supply chain: working fast towards a digital future

Japan has made great strides in the supply chain space and, according to the World Bank Logistics Performance Index (LPI), in 2018 ranked 5th in the world: embracing digital technologies to transform a traditional industry can only help Japan build on this. The 2018 ranking saw Japan climb seven places from 2016, an impressive achievement.

According to research from PwC, 67 percent of companies in the APAC region consider digital supply chain disruptive and important, and Japan’s steps forward are evidence of that. 3PL looks only set to grow; Japan’s attitude in implementing and deploying digital tools and solutions to augment and complement human workers in the supply chain is working. And companies can keep on progressing by partnering with experienced experts in digital supply chain, like Orange Business Services, to keep pushing forward to the next level.

To read about how Asia Pacific companies can transform their supply chains using the latest digital technologies, download the PwC report Building Connected Supply Chains.

Christophe Ozer
Christophe Ozer

Head of Sales Asia Pacific and General Manager Japan, Orange Business Services

Christophe Ozer has dual roles as APAC Head of Sales and Head of Japan. As Head of Sales in the region, he is driving and supporting the country teams to grow pipeline and win new and large transformational deals. Having lived in Japan for more than 10 years and heading Orange Business Services Japan for a total of 7+ years, he is well versed with the Japanese market.